Thursday, October 8, 2009

CBO says Senate bill will reduce the deficit, expand coverage to 29 million

Yesterday, the Congressional Budget Office (CBO) released its preliminary estimates on the impact of the Senate Finance Committee bill on the federal budget and providing coverage to the uninsured. The CBO estimates that the bill will reduce the federal deficit by $81 billion over the next ten years, and will likely continue to reduce the deficit in subsequent years. It would increase federal spending by $829 billion over ten years, but the higher spending would be more than covered by savings and revenue increases (taxes and fees) in the bill.

What would this spending buy? According to the CBO director's blog "The number of nonelderly people who are uninsured would be reduced by about 29 million, leaving about 25 million nonelderly residents uninsured (about one-third of whom would be unauthorized immigrants). Under the proposal, the share of legal nonelderly residents with insurance coverage would rise from about 83 percent currently to about 94 percent. Roughly 23 million people would purchase their own coverage through the new insurance exchanges, and there would be roughly 14 million more enrollees in Medicaid and CHIP than is projected under current law. Relative to currently projected levels, the number of people either purchasing individual coverage outside the exchanges or obtaining coverage through employers would decline by several million."

Who will pay? CBO says that the costs "would be partly offset by receipts or savings, totaling $311 billion over the 10-year budget window, from four sources: net revenues from the excise tax on high premium insurance plans, totaling $201 billion; penalty payments by uninsured individuals, which would amount to $4 billion; penalty payments by employers whose workers received subsidies via the exchanges, which would total $23 billion; and other budgetary effects, mostly on tax revenues, associated with the expansion of federally subsidized insurance, which would reduce deficits by $83 billion." Additional savings come from reductions in spending on Medicare in the following areas: "Permanent reductions in the annual updates to Medicare's payment rates for most services in the fee-for-service sector (other than physicians' services), yielding budgetary savings of $162 billion over 10 years (emphasis added italics), setting payment rates in the Medicare Advantage program on the basis of the average of the bids submitted by Medicare Advantage plans in each market, yielding savings of an estimated $117 billion (before interactions) over the 2010-2019 period, reducing Medicare and Medicaid payments to hospitals that serve a large number of low-income patients, known as disproportionate share (DSH) hospitals, by almost $45 billion." Another $22 billion would come as a result of recommendations from a Medicare Commission that would have the authority to bring proposals to Congress to reduce spending, which automatically would go into effect unless Congress passed an alternative with equivalent savings.

What happens next? The Senate Finance Committee is expected to vote on the bill next Tuesday, after which Senate Majority Leader Harry Reid will work to blend it with another version passed by the Senate's HELP committee. The merged bill would then have to be voted upon by the full Senate, and if it passes, reconciled with the version reported out of three House committees also making its way towards a vote.

ACP has prepared a preliminary analysis of how the SFC, HELP and House bill's compare to College policy in critical areas. The Senate Finance Committee, like the HELP and House bills, has many provisions that are consistent with ACP policies on coverage, workforce, and payment reform. At the same time, the SFC bill does not include a permanent solution to the Medicare SGR physician payment cuts, gives the Medicare Commission too much authority to propose and implement cuts without sufficient congressional oversight, would impose penalties on physicians who do not successful report on quality measures after several years of positive incentives, and reduce payments to physicians with the highest resource use - all areas of major concern to ACP.

The SFC bill and the favorable "score" by the CBO advance the prospects for health reform, but some of its provisions will be opposed by key constituencies. In addition to the concerns that physicians will have about the above provisions affecting physician payments, labor unions and insurance companies will likely howl about the excise tax on high cost plans, Republicans will say that the excise tax and individual mandates will raise taxes on the middle class, Medicare Advantage HMOs will object to the cuts in their payments, governors will object to shifting more Medicaid costs onto their states' budgets with insufficient federal funding, and progressives will object to the lack of a strong public plan option. President Obama will have his work cut out to negotiate a final bill with the Congress and not lose the support of key constituencies - especially doctors, health plans, hospitals, and labor unions - needed to push health reform over the finish line.

Today's questions: Do you think the Senate Finance bill advances the chances for health reform?

4 comments
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Well actually, the CBO scoring states that the cost of EXPANDING COVERAGE is $829 billion and does not include $11 billion for a one year SGR Physician Fix in 2010 and about $60-64 billion in other fixes ($21 billion to make the Part D drug benefit more generous plus others). So the total cost is above $900 billion. It also assumes that the 25% SGR mandated fee cut will go into effect in 2011 with subsequent 5% yearly cuts.

So from a PR standpoint, it advances the reform agenda. But it seriously underestimates the true cost of reform.

The question of whether the Senate Finance Committee bill advances the chances for health care reform seems to be essentially a political question.

To the extent that some kind of bill needs to emerge from the House and the Senate in order for there to be reconciliation, having a Senate bill is a prerequisite. To the extent that huge discrepancies remain between the House and what is shaping up in the Senate, it is hard to predict what the final outcome might be. For instance, the notion of a trigger for a public option is one way of getting the public option "in there" without it actually being "in there".

I woke up this morning to the news that Mr. Obama had won the Nobel Peace Prize. The NPR news analysis discussed that the prize in this case reflects more his aspirations for world peace than accomplishments in his short time in office thus far. Much the same can be said about the debate on health care reform. But as Steve Lucas states in the comment above, " What I hope does not happen is that the desire for some type of health care reform is lost in this battle. We have many serious issues that need to be addressed."

This is a bogus document, stopped to low ball cost scoring. ACP, AMA had better wake up. You have been taken for a ride. From the WSJ today: http://online.wsj.com/article/SB10001424052748704107204574469100132608102.html?mod=WSJ_hps_sections_opinion